Introduction
On 12 November 2020, President Muhammadu Buhari assented to the Banks and Other Financial Institutios Act 2020 (the Act). The Act repealed the Banks and Other Financial Institutions Act 1991 and with the addition of novel provisions, seeks to improve the efficiency of the country’s financial system.
Some of the objectives of the Act include – to modernize laws governing financial institutions and financial services in line with current trends in the banking sector; enhance the efficiency in granting licenses to banks and other financial institutions (OFIs); set-out the regulatory functions of the Central Bank of Nigeria (CBN) in the financial services industry; set out the laws for the licensing and regulation of micro finance banks, and regulate the activities of financial technology (Fintech) companies.
Inclusion of Fintech Companies under the Regulatory Purview of the Act
Chapter B of the Act makes provisions for Specialised Banks and OFIs. The Act prohibits any person from carrying on specialised banking or business of an OFI except it is a company duly incorporated in Nigeria and holds a valid license. Crucially, the Act expands the definition of OFIs to include finance company or money brokerage, international money transfer services, financial holding company or payment service providers and businesses whose objects include; project financing, debt administration, private ledger services, investment management and any other business as the CBN may determine from time to time irrespective of whether such businesses are conducted digitally, virtually or electronically only. This effectively enlarges the scope of the CBN’s regulatory powers to include certain types of Fintech companies. Such companies that were operating before the commencement of the Act must make a written application to the CBN for a license within 3 months of the commencement of the Act. Other application documents include a feasibility report for the proposed financial business including financial projections for at least 5 years, a draft copy of the Memorandum and Articles of Association of the company, such other information as the CBN may require and payment of the prescribed application fee.
